Voting Trust Agreement Definition

A voting trust is a legal trust created to combine the voting rights of shareholders by temporarily transferring their shares to the trustee. In exchange for their shares, shareholders receive certificates attesting that they are beneficiaries of the trust. The proxy is often required to vote in accordance with the wishes of these participating shareholders. The details of a voting trust agreement, including the timing in which it continues and the specific rights, are presented in a filing with the SEC. Voting trust agreements are usually operated by the current directors of a company as a counter-measure to hostile acquisitions. However, they can also be used to represent a person or group trying to take control of a company – for example. B creditors of the company who might want to reorganize a bankrupt company. Voting trusts are more common in small businesses because they are easier to manage. A voting trust is an agreement in which the shares of voting shareholders (also known as equity) are an account on a company`s balance sheet that consists of share capital plus and is transferred to a trustee for a specified period of time. Shareholders then receive escling certificates proving that they are beneficiaries of the trust.

You also keep an advantageous stake in the company`s shares and receive all dividendsDividendA dividend is a share of the profits and retained earnings that a company pays to its shareholders. When a company makes a profit and accumulates retained earnings, those profits can be reinvested in the company or paid to shareholders as a dividend. and profit distributions to shareholders. Voting trust agreements, which must be filed with the Securities and Exchange Commission (SEC), determine the duration of the agreement, typically for several years or until a specific event occurs. When a company faces financial difficulties, it can be subject to a tax-free reorganizationTo be considered a tax-free reorganization, a transaction must meet certain requirements that vary considerably depending on the form of the transaction. to help them restructure their business and restore viability. By transferring their shares to a group of trustees or creditors, shareholders express confidence in the trustees` ability to effectively resolve the problems that caused the financial problems […].